Earnings spur activity; Xilinx drops outright, expands on hedge; Cubist adds on hedge

By Rebecca Melvin

New York, July 23 – Convertibles players were focused on quarterly earnings reports on Wednesday, including reports from such convert issuers as Xilinx Inc., Cubist Pharmaceuticals Inc., Jakks Pacific Inc. and Hawaiian Holdings Inc., a Connecticut-based sellsider said.

“They were all big movers on earnings,” the sellsider said.

Xilinx convertibles traded very actively and were down sharply on an outright basis but better on a dollar neutral, or hedged, basis, after the San Jose, Calif.-based programmable chipmaker warned that revenue for the current quarter will be weaker than expected.

Likewise, Cubists’ dual convertible tranches were a bit lower on an outright basis, but better on swap by a little over a point for the A tranche and a little under a point for the B tranche, on lower shares post earnings, a trader said.

The Xilinx 2.625% convertibles due 2017 plunged 25 points on an outright basis to 141.629. Later it traded back up to 146 to 146.875 with the underlying shares at $41.09, or down 14.5%.

It was better by 2 points on a dollar-neutral, or hedged, basis, said a New York-based trader, who was busy in the name.

Cubist’s 1.125% convertibles due 2018 traded in the 108 to 109 context with the underlying shares at $63.05 at the close. The bonds were seen to have expanded by about 1 point to 1.25 points, a trader said.

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